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Return to Physician Payment Reform Introduction

Physician Payment Reform Getting Started

While payment reform is essential to the application of value-based purchasing, it is also technically complex and sometimes daunting for an employer purchaser. It is important to remember that purchasers don’t need to design the operational details of a new payment reform model – they do need to create the business imperative for it to proceed, however. With this in mind, employers should consider the following steps to advancing progress as have other employer purchasers, as cited in the case studies in this chapter.


Recommended steps to get started: large employers and coalitions:

1. Contracted insurers/TPAs:

  • ask and learn what your contractor(s) is already doing or planning, if anything, through survey, RFI or simple direct inquiry;

  • specify the payment model(s) of greatest interest, and advocate and/or seek to contractually require implementation;

  • encourage or require participation in collaborative efforts involving other employer purchasers and/or payers around performance measurement and payment[1]., and

  • require a rigorous process for evaluating cost and clinical effectiveness, as well as assessing lessons learned and applying in model refinement.

2. Serve as a vocal advocate for payment reform. Insurers are seeking employers who will help them make the case to sometimes intransigent providers. State legislatures and the Centers for Medicare and Medicaid Services, both of which can play a significant role in facilitating and shaping payment reform, need to hear the voice of employers and will respond if the voice is insistent, multiplied and repeated. 

3. Be patient. Payment reform will take time to be properly implemented, and initial efforts won't all be effective. Excessive zeal on the parts of employers, insurers and providers will likely result in early failure. Patience and caution will be necessary to implement, test and perfect the payment model changes.

4. Team up. It is a large transformation task to change health care payment systems. Individual employers would be well served by trying to advance change with existing employer coalitions such as those comprising the National Business Coalition on Health, or with multi-stakeholder coalitions that exist in some regions, representing the voices of employers, consumers, providers and insurers.

Recommended steps to get started: small employers

Effecting payment reform will be more challenging for small employers than for larger employers and coalitions. Smaller employers can still take action and have impact.

  • Pressure organizations representing small business to advocate for payment reform. For smaller employers, the best path lies with coalitions, trade associations and other business organizations, as well as with brokers. These entities have professional staff who represent small businesses and who can exert some market leverage because they represent an aggregation if employers.

Resources for employers 

  1. Payment Reform Primers
  2. Pay-for-Performance
  3. Supplemental Payment
  4. Bundled Payment
  5. Shared Savings
  6. Global Payment
  7. Consultants

[1] There are many existing examples. In California, insurers use common P4P measures to increase physician impact. In Colorado, Pennsylvania, Rhode Island and elsewhere, insurers have aligned their payment models for Patient-Centered Medical Homes. In several Accountable Care Organization pilots, multiple payers have agreed to arrange shared savings payment terms with a common ACO.

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A payment mechanism in which an employer and/or insurer shares with a healthcare provider(s) a percentage of savings accrued as a a result of more efficient, coordinated care being delivered.